Suppose that a sneaker company produces output using capital and labor.Capital costs $50 per unit and labor costs $5 per unit.If the firm is minimizing the costs of production when the marginal product of capital is 100 units, the marginal product of labor is:
A)5 units.
B)10 units.
C)50 units.
D)100 units.
E)none of the above.

Question

Quizplus · Accepted Answer

To minimize costs, the firm should use inputs in such a way that their marginal products per dollar spent (i.e., marginal products divided by their respective prices) are equal. Let MPL be the marginal product of labor. Then MPL/5 = 100/50, or MPL = 10. Therefore, the answer is B.

Suppose That a Sneaker Company Produces Output Using Capital and Labor.Capital